Gap Coverage
Gap coverage, also called auto loan or lease assistance coverage, is an optional auto insurance coverage that helps pay the difference (or the “gap”) between the amount of money you owe on your vehicle and the total cost to replace it with a new vehicle. Long vehicle loan and lease terms and depreciation can often leave Coloradans owing more on their loan or lease than the vehicle is worth.
FAQs
What does lease/loan gap cover?
After an accident, the insurance company will calculate the actual cash value (ACV) of your vehicle, which is based on the cost new of the vehicle less depreciation. Let’s imagine that you purchase a new truck for $35,000 and you have a loan or lease on the vehicle. Just a few short months after you purchase the new vehicle, you are involved in an auto accident that results in a covered total loss. The insurance company determines that the ACV for your vehicles is $30,000 but due to the terms of your loan, you still owe $34,000 on your vehicle. This would leave you with a $4,000 dollar gap in your coverage and a $4,000 bill for a vehicle that you no longer have. If you have gap coverage, the $4,000 is covered by your insurance policy and doesn’t have to come directly out of your pocket.
Is lease/loan gap coverage required?
Currently, there are no states that require you to carry collision insurance. If you have a loan or lease on your vehicle, your lender will typically require you to have collision coverage. While this coverage is optional if you own your car outright, you’ll want to consider the value of the vehicle when determining if collision coverage is right for you. If the repairs are greater than the deductible or if the vehicle is a total loss, having collision insurance can save you money and give you peace of mind while you’re on the road.
WHAT ISN’T COVERED BY COLLISION INSURANCE?
This coverage is usually optional but it may be required by your lender, especially if you have a lease on the vehicle.
What isn’t covered by lease/loan gap coverage?
If you use a home equity loan or a line of revolving credit to purchase a new vehicle (versus an actual auto loan) this coverage is not available. Gap coverage also does not pay for things like late payment penalties, extended warranties or loan rollover balances.
When do I need lease/loan gap?
If you’re in the market for a new vehicle, gap insurance is something that you should seriously consider. A good way to determine if this coverage is right for your situation is to obtain a current bluebook value for your vehicle prior to purchasing it. Compare the bluebook value to the amount you owe on your loan and if the amount you owe is more than the bluebook value, gap insurance would be a smart decision. If you do add gap coverage to your auto policy, you can remove this coverage once you owe your lender less than what your car is worth. Keep in mind that the car dealership may offer this coverage to you when you purchase a new vehicle but that you may be able to get this coverage from your insurance agent for less than the dealership cost.
What is the difference between auto insurance and classic auto insurance?
There are many features that distinguish classic car insurance from regular auto coverage. The most notable difference is agreed value. Typical vehicle policies value cars on an actual cash value basis, which is the cost new of the vehicle less depreciation. In contrast, classic car coverage uses agreed value, which means that your carrier will insure the vehicle for a value you agree to, often based on an appraisal. Classic cars often increase in value over time, while vehicles like a Toyota Camry will decrease. Keep in mind that you may need to adjust the agreed value of your classic car as its value changes. Classic auto coverage also helps pay for specialized repairs and the replacement of classic parts, which are often more costly than those of regular vehicles.
What is considered a classic car?
The definition of a classic car changes depending on who you ask and each insurance carrier has different guidelines for what is considered a classic vehicle. Generally, a classic car is defined by being 19-24 years old, while an antique vehicle is defined as being at least 25 years old. Classic auto insurance can cover a wide variety of vehicles. Here are some examples of classic vehicles:
- Antique cars
- Classic trucks
- Vintage cars
- Hot rods
- Collector cars
- Street rods
- Exotic cars
- Kit cars and replicas
- Luxury cars
- Vehicles being restored
- Muscle cars
- Modified vehicles, like lowriders
- Custom cars
- Retired commercial vehicles, like fire trucks
- Race cars
- Classic tractors
- Classic military vehicles
What is not considered a classic car?
Classic auto insurance can coverage a wide array of vehicles but how you use the car is a key factor in determining coverage. If you are using the car on a regular basis, like driving to work, it likely won’t be covered by a classic car policy. Off-road, recreational and commercial use vehicles will not typically qualify for classic auto coverage. Likewise, classic auto insurance isn’t designed to cover run-of-the-mill vehicles like a recent Subaru. Most insurance carriers require that there’s something special about the vehicle, like high value, advanced age or customization.
Am I eligible for classic auto insurance?
Most classic auto policies have a set of requirements that must be met in order to qualify for coverage. Usually the vehicle must be in good condition, used on a limited basis, not used for racing and must be properly stored, often in a secure and enclosed location. A clean driving record may also be required and some carriers require you to have a regular use vehicle for daily driving.
What are the benefits of classic car coverage?
Classic auto insurance is tailored to meet the needs of the classic auto owner and often includes or makes available specialty coverages you won’t find in a standard auto policy.
- No attendance required provides coverage for your displayed vehicle while you’re away from it, like at a car show
- Cherished salvage coverage kicks in when you total your classic car due to a covered cause of loss and allows you to keep the salvaged vehicle and still get a payment from the insurance carrier
- Roadside assistance typically pays for towing and delivery of items like oil or fuel
- Increased replacement cost is valuable if your vehicle increases in value beyond its agreed value
- Spare parts and automotive tools covers items that are used to maintain or restore your classic car
- Vehicle under construction coverage steps in if you’re restoring your classic vehicle and provides periodic increases to coverage
- Trip interruption may cover the cost of lodging, food and transportation if your car breaks down outside a certain radius from your home
- Automobilia coverage pays for collectible items like hood ornaments or vintage license plates
What are the drawbacks of classic car coverage?
Unlike standard auto insurance, classic auto insurance is designed for rare or high-value vehicles, which can create some drawbacks. Not all insurance policies are the same so be sure to check with your agent regarding any exclusions or limitations in your classic auto policy. Below are some common shortcomings of classic auto coverage:
- Fewer discounts are available for classic cars because the carriers that offer this insurance are often more niche
- Mileage limits are common in classic auto coverage and will only allow you to drive your vehicle a certain distance
- Fewer coverage options are available for classic vehicles because the carriers that offer this insurance are often smaller